Great Depression: A Worldwide Economic Collapse
The Great Depression The Great Depression was a worldwide economic collapse that was caused by a number of things which include: speculation in the stock market, inequalities in wealth, bank failures, and drought conditions. It started in 1929 and lasted until the late 1930s. It was the longest and most devastating depression ever experienced by the Western World. Before the Great Depression, there were few regulations that controlled the stock market. Stockholders were able to speculate and buy shares of stocks on margin or use money that they had borrowed. According to Encyclopedia.com, “Speculation in stock means to buy stock with the assumption that it can always be sold at a profit…Buying on margin means that a person purchases a
stock by using a bit of their own money and borrowing the rest” (Causes of the Great Depression).
Buying on the margin is basically like buying on credit. For example, to purchase a $500 stock the buyer might pay $450 and borrow the rest to make up the entire price. The stockholders work with investment brokers to borrow money and then buy a stock. The investment brokers got their money from the banks. The investors kept buying stocks by using their increasing profits and money that they had borrowed. Their speculation led to very high stock prices. So, when the stock markets began to fall before the October 29 crash, the investors could not make their margin calls. The cause of this resulted in a huge sell-off sparked by investor fear with some $16 billion lost during October of 1929.
A study that was done in 1929, proved that the top 1% of Americans had the same combined income as the bottom 42% of the rest of America. The same 1% of Americans controlled 30% of bank savings in the United States while 80% of Americans had no savings whatsoever. This shows that America during the 1920’s had a major unequal distribution of wealth which helped cause the Great Depression. Wealth inequality can be described as resources being unequally distributed within a population. The reason for the uneven wealth in that time was because most Americans either worked on farms or in factories. The normal American could not afford everything a person who was rich could afford, so they depended on things like credit to get what they wanted to buy, another reason why the consumer society of the 1920’s helped cause the Great Depression.
A bank failure happens when a bank is unable to meet its requirements to its investors because it has become in debt to meet its responsibilities. After the crash during the 1930’s, 744 banks had failed. In all, 9,000 banks failed during the time of the 30s. During the year of 1933 alone it is estimated that 4,000 banks failed. By 1933, investors saw $140 billion vanish through bank failures. The Depression caused banks to fail, people who had their life savings in the banks lost all their money.
Between 1930 and 1940, the southwestern region of the United States suffered a severe drought. Most settlers farmed their land or grazed cattle. The farmers planted dry land wheat and plain grasses. On the Great Plains, dry land farming led to destruction of the prairie grasses. Big areas of grassland began to be destroyed by overgrazing in the ranching regions. Substantial environmental damage began to occur, when the land was laid bare. The strong winds of the region were mostly devastating among the natural elements.
With the beginning of the drought in 1930, the farm land began to blow away. Winds traveled across the plains, bringing large clouds of dust with them. The dust was like snow in some places, covering buildings and houses. Nineteen states of America became a massive dust bowl. Families abandoned their homes and land, escaping to the west to become traveling laborers with no chance of living.
Speculation in the stock market, inequalities in wealth, bank failures, and drought conditions were just of the few causes of the Great Depression. These things made the depression to be of the most devastating and longest depression ever experienced by the Western World.
stock by using a bit of their own money and borrowing the rest” (Causes of the Great Depression).
Buying on the margin is basically like buying on credit. For example, to purchase a $500 stock the buyer might pay $450 and borrow the rest to make up the entire price. The stockholders work with investment brokers to borrow money and then buy a stock. The investment brokers got their money from the banks. The investors kept buying stocks by using their increasing profits and money that they had borrowed. Their speculation led to very high stock prices. So, when the stock markets began to fall before the October 29 crash, the investors could not make their margin calls. The cause of this resulted in a huge sell-off sparked by investor fear with some $16 billion lost during October of 1929.
A study that was done in 1929, proved that the top 1% of Americans had the same combined income as the bottom 42% of the rest of America. The same 1% of Americans controlled 30% of bank savings in the United States while 80% of Americans had no savings whatsoever. This shows that America during the 1920’s had a major unequal distribution of wealth which helped cause the Great Depression. Wealth inequality can be described as resources being unequally distributed within a population. The reason for the uneven wealth in that time was because most Americans either worked on farms or in factories. The normal American could not afford everything a person who was rich could afford, so they depended on things like credit to get what they wanted to buy, another reason why the consumer society of the 1920’s helped cause the Great Depression.
A bank failure happens when a bank is unable to meet its requirements to its investors because it has become in debt to meet its responsibilities. After the crash during the 1930’s, 744 banks had failed. In all, 9,000 banks failed during the time of the 30s. During the year of 1933 alone it is estimated that 4,000 banks failed. By 1933, investors saw $140 billion vanish through bank failures. The Depression caused banks to fail, people who had their life savings in the banks lost all their money.
Between 1930 and 1940, the southwestern region of the United States suffered a severe drought. Most settlers farmed their land or grazed cattle. The farmers planted dry land wheat and plain grasses. On the Great Plains, dry land farming led to destruction of the prairie grasses. Big areas of grassland began to be destroyed by overgrazing in the ranching regions. Substantial environmental damage began to occur, when the land was laid bare. The strong winds of the region were mostly devastating among the natural elements.
With the beginning of the drought in 1930, the farm land began to blow away. Winds traveled across the plains, bringing large clouds of dust with them. The dust was like snow in some places, covering buildings and houses. Nineteen states of America became a massive dust bowl. Families abandoned their homes and land, escaping to the west to become traveling laborers with no chance of living.
Speculation in the stock market, inequalities in wealth, bank failures, and drought conditions were just of the few causes of the Great Depression. These things made the depression to be of the most devastating and longest depression ever experienced by the Western World.